We’re very nearly back to the expansion peak on consumer sentiment in America.
The preliminary read on the University of Michigan’s gauge for February was 100.9, up from 99.8 in the prior month, and better than the 99.5 the market was expecting.
It was the highest print since March of 2018’s 101.4, the cycle high.
The expectations Index hit 92.6. That’s also the second-highest level of what is the longest expansion in history, although it’s nowhere near the all-time record of 108.6.
“Net gains in household income and wealth were reported more frequently in early February than at any prior time since 1960”, economist Richard Curtin noted.
Curtin described election jitters and uncertainty surrounding the coronavirus as “faint stirrings” among the populace.
“The coronavirus was mentioned by just 7% when asked to explain their economic expectations in early February”, he notes, adding that “the runup to the presidential election is likely to focus on the vast changes to taxes and spending programs”.
And yet, despite widely divergent views between Democrats and Republicans (and between Democratic presidential hopefuls) on the correct way to steward the world’s largest economy, Curtin says just 10% of all consumers “mentioned some aspect of the election as having a potential impact on their economic expectations”.
With the exception of a somewhat muted read on buying conditions for durables, this serves to underscore the contention that the US consumer can continue to carry the economy in an election year, although some flagged a disappointing read on the retail sales control group for January as incremental evidence that the workhorse of Trump’s economy is getting tired.
But perhaps more than anything else, record high consumer sentiment could simply reflect psychological buy-in from voters who are being bombarded daily with Trump’s grandiose pronouncements about America’s “newfound” economic prowess.
Larry Kudlow was on Fox Friday talking up more tax cuts, in an effort to ensure the propaganda knob stays cranked to a Spinal Tap-ish “11”.
Specifically, Kudlow told state television that the administration’s tax plan will “come out sometime in September”, and could include a 10% middle-income tax cut.
This is everywhere and always the same story. Trump has been dangling that middle-class tax cut in front of voters at least since the midterm elections.
Back in August, when the economy suddenly looked shaky, the president was said to be “rattled” and quite a bit of digital ink was spilled documenting the administration’s internal discussions around more tax breaks, whether in the form of a payroll tax cut aimed at helping middle-earners, or a move to index capital gains to inflation, a strategy that would ultimately hand some $100 billion to the wealthy.
I’m going to (briefly) rehash my usual commentary on this.
The notion of a tax break for working families presents a rather vexing PR quandary for Trump. First, tailoring a tax cut specifically to the middle-class is a tacit admission that the original tax cuts primarily benefited the wealthy and corporations. Second, discussing more fiscal stimulus suggests Trump’s characterization of the US economy as a kind of bulletproof locomotive may not be accurate. And third, under GOP orthodoxy, there is no room for more fiscal stimulus unless Trump wants to balloon the deficit even wider. (Of course, the GOP only cares about that orthodoxy when it’s a Democrat that wants to spend money, and both Democrats and Republicans steadfastly refuse to admit that, in reality, the US government cannot go “broke”, by virtue of the fact that it prints the world’s reserve currency.)
In November, the president teased the proposal again during an event convened to discuss healthcare pricing. “We’re gonna be doing a major middle-income tax cut, if we take back the House”, he promised. “And we’ll be talking about that sometime later”.
According to what Trump told the Journal late last month, “sometime later” will be sometime in the next 90 days. Kudlow’s comments on Friday suggest 90 days has morphed into at least six months.
Trump also used his address in Davos last month to tout what he called a “blue collar boom”. “[I’ve] created the most inclusive US economy ever”, he told the crowd.
In reality, over the last two years, the tax cuts have handed a total of $32.4 billion in savings to Wall Street’s largest banks.
As Bloomberg wrote last month, loan growth for the banks mentioned in the chart fell to 1% last year from 3% in 2018, and their combined workforce shrank by a net 1,200 people over the period.
At the same time, those six banks declared their intention to return a total of $21.5 billion to stockholders. Thanks to the tax cuts, profits at the largest banks hit $120 billion in 2019. Prior to Trump, they had never risen above $100 billion.
How this convoluted, schizophrenic pandering to whichever constituency needs pacifying on a given day has ultimately translated into stratospheric consumer sentiment is beyond my ability to explain, other than by reference to Trump’s legendary ability to bullsh-t people.
There’s really nothing coherent about the administration’s economic policies. Trump-o-nomics is an incongruous mix of supply-side gimmickry, populist balderdash, MMT and, whenever it’s convenient, Keynes.
It makes virtually no sense, until you consider the source. Trump has no set beliefs about anything. Every, single decision he makes is based on self-interest and expediency, and because Americans are a myopic bunch whose attention spans are now measured in seconds, it continues to work for him.
Is it sustainable?
Honestly, I have no idea anymore. Nothing Trump does makes any sense other than by reference to Donald Trump. His every word and deed is just a reflection of his own aura.
That’s a somewhat tautological assessment that would be true for anyone, but it seems especially apt when applied to psychoanalyzing Trump.
Increasingly, American society as a whole is a reflection of that same orange glow. From our economy to our politics to our institutions to our social interactions, the country has become synonymous with Trump’s brand of nationalism – a strange hybrid of tacky glitz and truck stop, bumper sticker jingoism.